1. At the instance of the assessed, M/s. Sawhney Rubber Industries, the Appellate Tribunal, Sales Tax, Delhi, has referred the following question of law for the opinion of this Court :
'Whether, on the facts and in the circumstances of the case, the goods mentioned in column 3(a) of the certificate of registration for purposes of manufacture could be deleted from the said certificate on the ground they were sent outside the Union Territory of Delhi for processing of compound prepared by mixing raw rubber with china-clay and burada ?'
2. The assessed was a registered dealer under the Bengal Finance (Sales Tax) Act, 1941, as applied to the Union Territory of Delhi. The certificate of registration was issued to the assessed and in column 3(a) of that certificate the following items were specified for the purpose of manufacture : (1) raw materials, (2) Chemicals, (3) oils, (4) solvent oils, (5) tyre cord, (6) bead wire, (7) solder (lead and tin) and (8) iron sheets. The assessed has a factory for manufacture of rubber goods at Loni Road, Shahdara, Delhi, since the year 1957. In September, 1970, the assessed shifted one of the processing units at Giani Border, U.P., for making of raw rubber with china-clay and burada. After the amendment of section 5(2)(a)(ii) of the Act in 1972 a notice was issued to the assessed as to why the items mentioned in column 3(a) of the certificate of registration for purposes of manufacture be not deleted. In response to the show cause notice the assessed had filed an affidavit admitting in terms that they have maintained a processing unit at Giani Border (U.P.) and sent raw rubber Chemical there for processing which is again transferred back to their main factory at Shahdara, Delhi. The Assistant Sales Tax Officer by order dated 27th August, 1973, held that the purpose of the amendment was that the entire manufacturing should he done in Delhi and since a part of it was done outside Delhi the assessed was not entitled. The items mentioned in column 3(a) were liable to be deleted.
3. Against the aforesaid order of the Assistant Sales Tax Officer, the assessed preferred a revision petition before the Assistant Commissioner, Sales Tax, New Delhi. The Assistant Commissioner asked for a remand report on the following points from the Assistant Sales Tax Officer :
(1) What type of raw material is being transferred to the factory situated at Giani Border, U.P.;
(2) Whether the compound processed in the U.P. factory is salable item; and
(3) Whether the entire stocks of processed compound were being brought back to Delhi factory.
4. In the remand report dated 21st August, 1974, the Assistant Sales Tax Officer stated that the dealer is transferring the following items to their factory situated at Giani Border, U.P. : (a) raw rubber, (b) synthetic rubber, (c) reclaim rubber, (d) china-clay, (e) black carbon, (f) burada and (g) spindle oil.
5. He further stated that besides this, items like burada, reclaim, carbon A & O, sulphur, accelerators, anti-oxidants, zinc oxide, stearic acid, wax, china-clay, finishing agents, which are purchased as raw materials on the strength of the local registration certificate, are not being transferred to their factory at U.P. It has been further mentioned that the compound processed in U.P. factory is not a salable commodity and that the entire stocks of processed compound are being brought back to Delhi. However, in spite of the said remand report, the Assistant Commissioner held that in the absence of any specific provision vesting the authorities with extraterritorial jurisdiction, the sales tax authorities cannot keep any control on the transfer of raw material from Delhi to another State and the consequential import of the semi-finished goods inside the Union Territory of Delhi. In the absence of any such legal sanction the authorities cannot take a chance on the goodwill of the dealer. With the observations, the revision petition was dismissed by order dated 6th March, 1974. Second revision of the assessed to the Financial Commissioner met with the same fate. The Financial Commissioner upheld the findings of the Assistant Commissioner and further relied on two judgments of this Court on the interpretation of section 5(2)(a)(ii) of the Act, the main judgment being in the case of Fitwell Engineers v. Financial Commissioner  35 S.T.C. 66 In the Fitwell Engineers' case  35 S.T.C. 66 this Court held that for the purposes of section 5(2)(a)(ii) and the second proviso thereto resale of the goods purchased was confined to resale in Delhi; so also the use of the goods purchased as raw materials in the manufacture of goods and sales of manufactured goods were required to be inside Delhi and thereforee if the assessed resold the goods outside Delhi or used them as raw materials in manufacture outside Delhi even if the manufacture was inside or sold the goods manufactured outside Delhi, there was utilisation of the goods by the assessed for a purpose other than for which they were purchased and hence the second proviso to section 5(2)(a)(ii) was attracted and the price of goods purchased was liable to be included in the taxable turnover of the assessed. This judgment was, however, reversed by the Supreme Court in the case of Polestar Electronic (Pvt.) Ltd. v. Additional Commissioner, Sales Tax : 3SCR98 on the ground that at the relevant time the manufacture and sale contemplated by the section were not restricted to the territory of Delhi but could also be outside. In any case, these cases have no relevance for the controversy in the present case.
6. Section 5(2)(a)(ii), after its amendment on 28th May, 1972, reads as under :
'Section 5. (2)(a)(ii) In this Act the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after, deducting there from -
(a) his turnover during that period on -
(i) the sale of goods declared tax-free under section 6;
(ii) sales to a registered dealer -
of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for resale by him, or for use by him as raw materials in the manufacture in the Union Territory of Delhi (hereinafter in this sub-clause referred to as Delhi), of goods (other than goods declared tax-free under section 6), -
(A) for sale inside Delhi; or
(B) for sale in the course of inter-State trade or commerce, being a sale occasioning, or effected by transfer of documents of title to such goods during the movement of such goods from Delhi; or
(C) for sale in the course of export outside India being a sale occasioning the movement of such goods from Delhi, or a sale effected by transfer of documents of title to such goods effected during the movement of such goods from Delhi, to a place outside India and after the goods have crossed the customs frontiers of India; and
of containers or other materials for the packing of goods of the class or classes so specified for sale :
Provided that in a case of such sales a declaration duly filled up and signed by the registered dealer to whom the goods are sold and containing the prescribed particulars on a prescribed form obtainable from the prescribed authority is furnished in the prescribed manner by the dealer who sells the goods;
Provided further that where any goods specified in the certificate of registration are purchased by a registered dealer as being intended for resale by him or for use by him as raw materials in the manufacture of goods for sale, but are utilised by him for any other purpose, the price of the goods so purchased shall be allowed tube deducted from the gross turnover of the selling dealer but shall be included in the taxable turnover of the purchasing dealer.'
7. Before the amendment of the section the words 'in the Union Territory of Delhi' were not there and on this basis the aforesaid case of Polestar Electronic (Pvt.) Ltd. v. Additional Commissioner, Sales Tax : 3SCR98 , was decided.
8. The question which requires consideration is whether the activity of the assessed in sending the raw materials outside the Union Territory of Delhi for processing a compound by mixing raw rubber with china-clay and burada amounts to manufacture and as such disentitles him from having the entries in column 3(a) of the certificate of registration. The concurrent findings of the authorities are that certain material is sent out for compound process but the said compound process is not a salable commodity and the entire stocks of the process compound are brought back to Delhi. It is true that to, constitute 'manufacture' it is not necessary that there must be a complete transformation in the material but all that is necessary is that the material should have been changed or modified by man's art or industry so as to make it capable of being sold in an acceptable form to satisfy some want, or desire, or fancy or taste of man. It was so held by the Madhya Pradesh High Court in the case of Hiralal Jitmal v. Commissioner of Sales Tax  8 S.T.C. 325 Reliance was placed by the learned counsel for the department on the case of Shaw Wallace & Co. Ltd. v. State of Tamil Nadu : 3SCR795 In that case the principal question for determination was whether the fertiliser mixtures in question could be treated as the same article as Chemical fertilisers composing them. The Supreme Court held that the mixtures produced by the appellant were different from their component parts; their properties and uses were also different and they were sold as different commercial products and as such the appellant was not entitled to the exemption claimed. The question whether there was any manufacturing process involved in the preparation of any fertiliser mixture or whether shovel mixing of the Chemical fertiliser amounted to manufacture or not, was found to be irrelevant and was not decided. thereforee, this case is of no help to the learned counsel for the department. In the present case, we have definite findings to the effect that only some of the items mentioned in column 3(a) are taken out of the Union Territory of Delhi and the process involved is only of mixing raw rubber with china-clay and burada. It is also an admitted fact that the compound processed in the U.P. factory is not a salable commodity and that the entire stocks of processed compound are brought back to Delhi. The assessed is a registered dealer for manufacture of rubber goods and the rubber goods are admittedly manufactured within the Union Territory of Delhi. The activity outside the Union Territory of Delhi is confined to the processing of compound prepared by mixing raw rubber with china-clay and burada. Obviously processing is different from manufacturing and since the manufacture was done in Delhi itself, it cannot be said that the assessed was not entitled to retain the entry in column 3(a) of its certificate.
9. There is yet another aspect of this case and, that is, if the department finds that any manufacturing has taken place outside the Union Territory of Delhi, all that it can do is to apply the second proviso to section 5(2)(a)(ii) and include the said article in the taxable turnover of the purchasing dealer. There is no provision in the Act or the Rules by which the entire entry in column 3(a) of the certificate of registration can be deleted.
10. For the reasons recorded above, we answer the question referred in the negative, i.e., in favor of the assessed and against the department. In the circumstances, there will be no order as to costs.
11. Reference answered in the negative.
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